Credo Technology Group Holding(CRDO +0.99%) reported first-quarter fiscal 2026 results on September 3, 2025, posting $223.1 million in revenue (up 31% quarter over quarter, 274% year over year) and a non-GAAP net margin of 44.1%. Robust demand for Active Electrical Cables (AECs), continued optical segment growth, and expanding hyperscaler relationships drove record profitability. Management issued revenue guidance of $230 million to $240 million for fiscal 2026 and projected full-year revenue growth of approximately 120% year over year.
Non-GAAP profit margin climbs for Credo
Non-GAAP operating income reached $96.2 million, up from $62.5 million in the prior quarter, reflecting a 31% quarter-over-quarter revenue gain and high incremental operating leverage. Free cash flow totaled $51.3 million, with quarter-end cash and equivalents of $479.6 million and non-GAAP gross margin at 67.6%.
"Our non-GAAP net income was $98.3 million in the quarter, a record high, and a 51% sequential increase compared to non-GAAP net income of $65.3 million in Q4. And our non-GAAP net margin was 44.1% in the quarter, as we drove significant leverage in the business."
-- Dan Fleming, Chief Financial Officer
This margin expansion demonstrates that Credo's product mix and operational strategy are delivering substantial operating leverage, supporting sustained profit growth as hyperscaler deployments accelerate.
Customer diversification strengthens Credo’s AEC growth
Three separate hyperscalers each comprised over 10% of revenue, with a fourth hyperscaler generating its first material contribution and on track to exceed 10% of annual revenue, indicating deepening customer penetration and decreasing end-market concentration. The largest customer accounted for 35% of revenue, the second-largest for 33%, and the third-largest for 20%, with management expecting all three to grow significantly year over year.
"Three hyperscalers each contributed over 10% of our revenue, and we expect our customer diversification to continue to broaden over the upcoming quarters. Based on customer forecasts, we anticipate significant year-over-year growth. While shipment timing may lead to nonlinear growth patterns at a customer level, we see every data center partner scaling their deployments. We're making strong progress with new customers as well, highlighted by the first material revenue contribution from a fourth hyperscaler in Q1. We anticipate this revenue to grow throughout the fiscal year, further strengthening our market position."
-- Bill Brennan, Chief Executive Officer
This hyperscaler ramp-up and diversification reinforce Credo's insulation from individual customer risk, expand its total addressable market as hyperscaler spending cycles shift, and reflect rising adoption of AECs for both inter-rack and rack-to-rack connectivity in AI infrastructure buildouts.
Optical innovation positions Credo for long-term growth
Credo's 2026 roadmap prioritizes advancement in optical digital signal processor (DSP) products, with new three-nanometer node development launching soon to address power efficiency and enable full DSP and linear receive optical (LRO) solutions at 1.6 terabit per second. Management reiterated that more than half of current R&D operating expenses support forthcoming optical initiatives, confirming optical as a key strategic pillar alongside AECs.
"For several years, the industry has debated the shift from copper to optical connectivity solutions. While consensus holds that copper will remain prevalent in the foreseeable future, Credo is strategically prioritizing optical solutions as a cornerstone of our product roadmap. We see an expanding TAM for both copper and optical connectivity solutions. We're excited by the opportunity to bring our system-level expertise to bear in the optical market, further diversifying our position."
-- Bill Brennan, Chief Executive Officer
Credo’s dual-track innovation and system integration in both copper (AEC) and optical (DSP/LRO) segments position the company to capture multiple waves of growth as bandwidth, reliability, and power efficiency remain critical for hyperscale AI deployments.
Looking Ahead
Revenue guidance for fiscal 2026 is $230 million to $240 million, with non-GAAP gross margin of 64% to 66% for Q2 and non-GAAP operating expenses of $56 million to $58 million for Q2. Sequential revenue growth in the mid-single digits is expected throughout the year, cumulatively reaching approximately 120% year over year, with customer concentration declining as a fourth hyperscaler crosses the 10% revenue mark. Full-year non-GAAP net margin is expected to be around 40%, with non-GAAP operating expense growth below 50% year over year.
